That dreaded trading psychology again!

I’m back on my spreadbetting account trading the Dow Jones.

My first trade was a decent short I felt as the stochastics were overbought and the MACD was showing negative divergence… it’s gotta be heading downwards. Indeed, it did head lower but only 10 points so before it headed higher and hit my stop. I was very paid for this traded and let it ride hoping that the resistance level around 12830 would contain it.. unfortunately, it didn’t and I got stopped out for -14.

As it broke above the resistance level, I felt more confident for a long and went in at double the trade size (it’s still relatively small) and got +5. As I went in at double size, the total win is +10… however, the market went another 10 points higher. I was anticipating a turn as the market was looking increasingly overbought.  However, there is a trading saying which says trade what you see and not what you think… indicators such as stochastics and MACD are all derived on the price action, the price action is what you should be concerned about and not the action of the indicators.

As I write, the market is looking to turn once again. The stochastics on the 5 mins and turning for the lower and the 1 min chart also..  as a result, I have shorted here but alas, I have spotted that the MACD on the 5 min is not in short territory.

I have a dilemma now.. I have a live trade in the market. It is in profit and could go my way for further profits or it can go the other way and stop me out for a loss.

You will get annoyed both ways, if I close out now for a profit then I will be annoyed if the market fell further. However, if the market reverses and I get stopped out I will get annoyed as I had some profits in the bag. This is the dilemma of trading which makes it such a difficult game to play… it tests your trading psychology and you can never get it 100% correct. Losses are inevitable and it’s your trading psychology which determines how successful you become at this.

As I write, I have close my short trade for +14 profit. Total for the day is +10.. not very eventful and the trading psychology didn’t help. Have a look at my charts for entries and exits.

(click on picture for larger sized view)


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Category: money, Spreadbetting, Trading